Why we love to hate HR…and what HR can do about it: Peter Cappelli

Opening the Oracle HCM World Conference 2016 with a keynote, Peter Cappelli, George W. Taylor Professor of Management at The Wharton School and Director of Wharton’s Center for Human Resources spoke about the reasons why HR has been frowned upon in the past, and the kind of analytic counsel the “new HR” should provide.

Here are some excerpts from his keynote:

Every function is worried about getting a seat at the table and gaining more influence. And it’s not like you get influence and you got it forever. It’s a constant battle to make sure you’ve got more influence than perhaps you already have.

Now HR has some special problems, which we’ll talk about in just a minute.

Before that, let’s talk about your organisation: Which function/group would you say really has the most influence? What does influence mean? It means the people at the very top, the CEO and the top team are paying attention to them?

How many of you said it was finance, or even IT?

Well, it might be different depending on where you are, but there are a couple of things that are going to make some functions influential.

Firstly, you’ve got to be working on a problem that the people at the top think really matters. And you’ve got to be able to offer some kind of solutions. If you don’t have both of those together, you lose influence pretty quickly.

Why is HR not more influential? At the very least, we’d like to be less unpopular. So let’s figure out what we need to do in order to do so.

People are our most important asset. I think to some extent, the evidence is deducing this is really true. If you look across businesses there’s not much that distinguishes them except for the people in them and the rules for managing people.

The idea that learning organisations are the key to success has also become more popular over time.

Well what does learning mean? It means people are learning inside organisations. So if we believe this, and it’s hard to find people who don’t, why aren’t we more influential?

Let’s ponder that question a little bit and let me ask you a few questions. Why is it that people don’t like HR?

First thing to note on this is, it’s probably not you.

In 1930s, in Fortune, somebody wrote an article saying since HR is an enormous pain in the neck, what do we need it for?

To be influential, you’ve got to be working on a problem that the people at the top think really matters. And you’ve got to be able to offer some kind of solutions. If you don’t have both of those together, you lose influence pretty quickly.

Well let me give you a little context. What do you think was happening in the 1930s? The Great Depression was underway. So if you had any kind of job at all, it looked pretty darn good in the 1930s. That’s the point when job satisfaction peaked in the US, highest ever reported during the Great Depression.

And so the line managers were saying – look, why do we need HR? People are happy to be here, no one’s quitting, we can abuse them and they’re still happy. The HR guys were telling them to stop hitting your employees. No kidding.

They were really saying you shouldn’t whack people around, and that it isn’t good for morale. Now, that was a pretty low bar for HR. This was because the line managers are saying – why not? Nobody’s quitting, what’s the problem?

So we’re going to see some of this pattern we’ve seen over time, of when people hate HR is going to be something we will be able to explain.

They don’t always hate HR, but when they do we will be able to explain. It’s got something to do with the labour market.

Now in the 1950s-60s, there was an interesting survey done of corporate executives in the US. They asked them, which functional area in business was the most glamorous? You can’t bring yourself to say HR right? But it was HR. HR was the most glamorous section of business. Why is that?

Well the reason was, at the time, all careers were internal. So if you were going to get ahead, you were going to get ahead in that company.

The HR department had a group of people, formally known as the chess masters, they were moving you around the company. These were the guys who decided if you went to Paris or Sheboygan. So these guys – all their jokes were funny, they got terrific Christmas presents and they never had to buy a drink at the bar.

These guys were incredibly powerful in the 50s and 60s because you were controlling everybody’s careers. You were doing something which is really important for the organisation.

The last really hot labour market we had, in the late 1990s, was when the IT boom going on. The hottest job in America was, in that late 1990’s period, wasn’t IT.

It was corporate recruitment. It’s the people who were filling the IT jobs. That was the hottest job.

So there were moments when HR was becoming incredibly powerful. Maybe we’re going to come back to such a stage, or when HR was not very powerful.

Now, here’s the problem we have to deal with unfortunately. One of the reasons why people really don’t like HR, is because we make people behave and they don’t like it.

So you think about these kinds of problems.Even if you think the jokes are funny, you still can’t tell sexist or racist jokes.

And when you think about it, this is one function that goes all the way to the top of the command. The HR people, the compliance people, are telling everybody how they have to treat each other and a lot people don’t like it.

So one of the problems HR has is that it can’t get around is this problem. There are a lot of ways in which we require people in the organisation (including the top executives) to behave and they don’t especially like it.

It’s hard to think of any other function in a business where that much day-to-day control is given. Over how people interact with each other, even in ways they would think are informal, the HR folks would tell them not to.

So this is important, it’s influence, but it’s not necessarily something that makes people like us, even though it’s very important.

One of the reasons why people really don’t like HR, is because we make people behave and they don’t like it.

And then we have this cyclical problem. In the 1930s they hated HR. Why? Because they didn’t really need it. Was it hard to hire? Was it hard to keep people? In the 50s and 60s, HR was really influential. Why? All careers were internal.

Late 90s, the economy was booming again. HR becomes very important, because just getting people and keeping them there is a crucial issue.

Unfortunately for us, since 2008, there has been a terrible labour market with regards to how HR is viewed.

For HR, that means problems are not that hard. It’s easy to hire people, keep them, you could be mean to them and they more or less didn’t. So we’ve gone through a period when the labour market was pretty slack.

For the rest of the line managers, they didn’t really see what the problem was. So HR budgets get cut, HR influence begins to fall. It’s sort with the business.

Let’s talk about some other things here, that we could probably do something about. Here’s the first one: This is a new problem that HR has found itself with a lot.

This is when human resources becomes responsible for things that we don’t have the authority to make happen. But we’re still responsible. What are we talking about?

Well, one of them might be getting people to fill out performance appraisals. Don’t you hate that? What do you end up doing? You end up nagging with people by saying “please fill this out..etc”.

But we can’t make them do it. And as a result, you’re kind of wearing out your welcome because we’re just nagging at people all the time.

This is just one issue, but we’re going to see that if you spread it out, we begin to wear out our welcome and our social capita.

Here’s a longer term problem.

Human resources, if we do it right, solves long term problems. You head off employee relations problems, you prevent lawsuits, you keep the government out from nosing around in your organisation – because you’ve avoided all the problems that can get you in trouble.

If you do that right, it pays off but it’s going to take a long time for people to see what you’re doing. And if you do a good job training and developing people, you’re going to see the benefits – but the benefits will play out years into the future.

In a blog post about the conference, Cappelli has also provided the tasks HR needs to do to rise above the prevailing reputation of taskmaster and reclaim the role of strategic partner:

Clearly, HR needs to do some things differently. HR professionals need to disrupt the historic cycle that has defined them and take action now, ahead of the next inevitable shift to talent scarcity.

Specifically, I see a need for five actions.

1. Set the agenda

Educate executive leaders on what workplace issues they should care about and why, by articulating a point of view on every people-related topic, whether you’re invited to or not.

Business-line leaders can have strong opinions and influence on layoffs, recruiting, flexible work arrangements, performance management, and other workplace issues. HR needs to make sure its input is heard, too, suggesting how each task should be handled and citing the evidence behind their guidance.

For example, HR can not only help protect the organisation from litigation risk and the cost of poor hires during the recruiting process, but can also make sure that practices address applicant expectations and maintain a relationship with the company’s brand and products (some applicants are also customers) if they aren’t selected. Line leaders don’t have the knowledge or skills for this.

2. Focus on issues that matter now

Practice know-how is important, but knowing what works when and why is more important. HR teams that succeed here will identify and implement solutions that work well within the current operational conditions, which for most businesses are changing faster and more frequently than in the past.

Human resources, if we do it right, solves long term problems. You head off employee relations problems, you prevent lawsuits, you keep the government out from nosing around in your organisation – because you’ve avoided all the problems that can get you in trouble.

Deloitte, for example, disrupted its traditional ladder-style advancement track in response to a pressing need to retain and better engage key talent. Now Deloitte employees have a more open and flexible framework for career advancement, and the business has more agility to respond to change.

3. Acquire business knowledge

Workforce analytics is one of seven tracks at HCM World for good reason. Data-driven decision-making is becoming a norm, but in a recent survey by Deloitte, HR leaders said they are unprepared in analytics.

If HR doesn’t have the capability to use big data to solve classic HR challenges such as finding the best job candidates and improving productivity, then CIOs and their teams will fill the gap.

Fortunately, advanced business process technology has made it possible for nontechnical roles to access and apply analytics in everyday workflows, including those in HR .

4. Highlight financial benefits

HR departments aren’t used to quantifying revenue and profit contributions, but they need to get used to it. When HR teams document outcomes, traditionally they focus on individual benefits such as job satisfaction. But with the ability of organisations to gather and analyse copious amounts of data today, the excuse that one can’t quantify “soft” benefits doesn’t hold.

HR teams should be evaluating data on turnover, productivity, and other workforce issues to look for opportunities to become more effective and efficient, and then they need to link their actions to strategic performance metrics. The key here is to quantify HR costs and benefits in a way that turns talent decisions into business decisions.

5. Stop wasting time

HR invests in many programmes that have minimal business impact. Think about the current preoccupation with engaging and retaining millennials, as if they’re an entirely different species. They aren’t.

Instead it makes more sense for HR to prioritise making the workplace an environment where all generations are engaged, collaborating, and are able to envision a career path with their employer.